EUR/USD is poised to end the week with a loss of 0.21%, but it remains above 1.16 for the third day in a row, capped by upside from key resistance levels after US data may not deter the Fed from cutting interest rates.
Euro supported by upbeat PMIs; Moody’s warning against France limits upward momentum
US inflation data would not move the needle in favor of the Fed hawks, missing estimates to the downside, though still far short of the central bank’s 2% target. Then S&P Global showed the economy is showing signs of strength as manufacturing and service-boosted PMIs grew in October.
Meanwhile, the University of Michigan (UoM) closed the document for the day amid the US government shutdown that reached its twenty-fourth day, revealing that US consumers are growing slightly pessimistic as they assess that prices may continue to rise.
Of late, the greenback has pared some of its gains as the Trump administration launched a trade probe into whether China complied with a limited trade deal struck in 20202 during President Donald Trump’s first term, Bloomberg revealed.
In Europe, HCOB Flash Purchasing Managers Indices (PMIs) rose in October from 49.8 to 50 and from 51.3 to 52.6 respectively. Both prints exceeded forecasts, an indication that business activity is picking up as demand rises.
At the time of writing, Moody’s Ratings changed France’s outlook to negative, affirming aa3 rating and said “France’s political instability risks hampering the ability to deal with key policy challenges such as increased fiscal deficit, rising debt burden.”
Daily Market Moves: EUR/USD Holds Firm Despite Solid US PMI Data
- The US Dollar Index (DXY), which tracks the performance of the buck against a basket of its rivals, rose 0.03% to 98.94, capping EUR/USD’s gains.
- The US consumer price index (CPI) rose 3.0% in the 12 months to September, coming in just below forecasts of 3.1% and slightly higher than August’s 2.9% reading. Core CPI – which excludes food and energy – rose 3.0% year-on-year, a tenth from the previous month.
- US business activity accelerated in October, marking the second-fastest pace so far this year, according to preliminary “flash” PMI data from S&P Global. The report also highlighted the strongest increase in new business seen in 2025 to date, underscoring the continued resilience of private sector output. The S&P Global Manufacturing PMI rose to 52.2 in October from 52.0 in September, signaling continued expansion in the sector. The Services PMI rose to 55.2 from 54.2, marking a three-month high and underscoring solid momentum in business activity.
- The University of Michigan’s consumer sentiment index was revised down to 53.6 in October from a preliminary reading of 55.0, missing expectations of 55.1. One-year inflation expectations fell slightly to 4.6% from 4.7% in September, while the five-year outlook rose to 3.9% from 3.7%.
- The US Federal Reserve is expected to cut interest rates by 25 basis points to a range of 3.75% – 4%, with traders already pricing in a further 0.25% cut at the December meeting.
Technical outlook: EUR/USD consolidating but slightly bullish
EUR/USD’s technical outlook has improved modestly but remains neutral as the pair trades below the confluence of the 20-day and 100-day Simple Moving Averages (SMAs) at 1.1653 and 1.1658 respectively. The Relative Strength Index (RSI) has dipped below the neutral 50 mark, indicating growing bearish momentum.
Immediate support is seen at 1.1600, followed by 1.1550 and 1.1500. A clear break below this zone would reveal the August 1st cycle low around 1.1391. On the upside, resistance remains in line with the 20- and 100-day SMAs, while a decisive move above 1.1700 would open the way towards 1.1800 and the July 1 high of 1.1830.
Euro frequently asked questions
The euro is the currency of the 19 EU countries that belong to the eurozone. It is the second most traded currency in the world behind the US dollar. By 2022, it accounted for 31% of all foreign exchange transactions with an average daily turnover of over $2.2 trillion per day. EUR/USD is the most traded currency pair in the world, accounting for an estimated 30% discount on all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany is the reserve bank for the euro area. The ECB sets interest rates and controls monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is to raise or lower interest rates. Relatively high interest rates – or the expectation of higher interest rates – will usually benefit the euro and vice versa. The ECB’s Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are taken by the heads of the eurozone’s national banks and six permanent members, including the president of the ECB, Christine Lagarde.
Eurozone inflation data, as measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the euro. If inflation rises more than expected, especially if it is above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the euro as it makes the region more attractive as a place for global investors to park their money.
Data releases measure the health of the economy and can affect the euro. Indicators such as GDP, manufacturing and services PMIs, employment and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the euro. Not only does it attract more foreign investment, but it may encourage the ECB to raise interest rates, which will directly strengthen the euro. Otherwise, if economic data is weak, the euro is likely to fall. Economic data for the four largest economies in the Eurozone (Germany, France, Italy and Spain) are particularly important as they account for 75% of the Eurozone economy.
Another important data release for the euro is the trade balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will gain in value solely from the additional demand created by foreign buyers seeking to purchase those goods. Therefore, a positive net trade balance strengthens a currency and vice versa for a negative balance.